In the latest in a string of alleged Ponzi schemes, civil fraud charges have been filed against a Colorado investment manager who operated a $20 million operation that allegedly victimized dozens of investors in at least three states.

Shawn Merriman, 46, used some of his investors' funds for personal expenses, including purchases of Rembrandt masterpieces worth millions of dollars and other artwork, according to a lawsuit announced Wednesday by the Securities and Exchange Commission.

Operating through Market Street Advisors, an Aurora-based firm he owned, Merriman allegedly promised investors annual returns as high as 20% from stock trading. He lost about $400,000 through aggressive investments by the initial investment fund he launched in 1995, the SEC said.

But instead of reporting losses to investors, the former stockbroker allegedly started a second fund to pay withdrawals, a typical Ponzi scheme mechanism.

According to the SEC lawsuit, Merriman subsequently started a third and a fourth fund. Although he initially traded some securities, he allegedly stopped after the first year in business and thereafter used all investor money to pay withdrawals and bills.

His personal expenses included purchases of 157 paintings, etchings and other art by Rembrandt, Peter Paul Rubens, Albrecht Dürer and other masters, according to a federal forfeiture complaint. Merriman also used investors' money to buy classic cars, including a 1930 Lincoln, the complaint charged.

Defense attorney Patrick Ridley said Merriman contacted federal prosecutors and gave them a breakdown of his business operations for the last 15 years. "He has personally contacted each of his clients to whom he has made full disclosure of his actions and apologized," Ridley said.

According to the SEC, Merriman said he raised $17 million to $20 million from at least 38 investors in Colorado, Minnesota and Utah.

Donald Hoerl, director of the SEC's Denver regional office, said victims of Merriman's alleged scam included many who viewed him as a personal friend. Investigators are seeking an audit to pinpoint victim and loss totals, Hoerl said.

Since Jan. 1, the SEC has brought more than 12 emergency enforcement actions to halt alleged Ponzi schemes and other frauds such as the Bernard Madoff scam, said Robert Khuzami, the agency's enforcement director.

Similarly, the Commodity Futures Trading Commission has filed 20 enforcement actions to stop alleged Ponzi schemes since the federal fiscal year started in October. Criminal charges have been filed in eight of those cases.

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